Serious Fraud Office merger into National Crime Agency announced in Conservative Manifesto

Teresa May’s long-standing determination as Home Secretary to merge the Serious Fraud Office (SFO) with the National Crime Agency (NCA) came to fruition, on the 18th of May, when the policy was included in the Conservative Manifesto ahead of June’s election.

Immediate reaction from the legal community, as well as NGOs such as Transparency International, has been less than positive. At a time when one would think that there are so many other important priorities, this merge could be a retrograde step for large-scale fraud and corruption prosecution and case resolution. Just at a time when the SFO is starting to use – to good effect – its relatively new powers of Deferred Prosecution Agreements, and has issued clear and consistent Guidance as to how companies can expect to be dealt with by them in the lead-up to such case resolution, it appears the system will change. Change means uncertainty, and companies are unlikely to want to engage with an unknown and untried system of cooperation.

As a lawyer who has worked in-house at a company that has faced a number of contemporaneous Government investigations, one thing is clear: companies want certainty. The lawyers advising those companies need to be able to explain to their boards and shareholders why decisions were taken, and that means being pretty sure what the outcome would be if a decision is taken one way or another. The current proposed extension of vicarious liability in the field of corporate criminal liability, namely rendering companies liable for “failing to prevent” a range of offences, means that businesses are more likely than ever to face criminal investigations. And companies will need to understand how best to make decisions in that context.

There is also of course the question of how the merger will take effect. The SFO is a creature of statute, with the Director’s powers set out in the Criminal Justice Act 1987 (“CJA”). That will require legislative change in order to divest the NCA with the specific powers included in the CJA. Those powers include “s.2” powers to interview a person without a corresponding right to silence (mitigated by the inability to adduce into evidence against the person anything he says in that interview). Will those powers be extended to all NCA cases, or reserved only for the fraud and corruption cases previously dealt with by the SFO? And the SFO of course is not only an investigating agency but a prosecutor, with powers to make its own decisions (subject, for some offences, to the consent of the Attorney-General) on the cases that it charges. Will this prosecutorial role be maintained following the merger of the two organisations, or will a specialist team at the Crown Prosecution Service be tasked with taking the charging decisions?

And then there is the question of the cultures of the NCA and SFO respectively. The NCA is much more of a police-focused organisation than the SFO, which is lawyer-driven. One could argue both ways about whether one is better than the other: police have historically been better at obtaining and sharing intelligence, while lawyers generally focus on the outcome or “legal product” they are working towards – namely, a criminal trial. The SFO was created on the Roskill model, of cases being led from the earliest stage by lawyers, including the barrister likely to present the case to a jury. How these two cultures sit and work together can be a source of tension, so one can only wait to see how it plays out under the Conservative Party’s proposals.

More importantly, however, is the structure and accountability of the NCA, which is a “non-ministerial Government department” and reports to the Home Office. The SFO, which is part of the Government Legal Service, is independent of the Executive and reports to Parliament via the Attorney-General (“A-G”). There is good reason for this, as it preserves the independence from political influence of the SFO as an investigation and prosecution agency. While the A-G is admittedly a political appointee, he or she has a primary obligation as a lawyer to the court. This independence is vital to our rule of law. The clash between politics and justice is currently playing out dramatically in the US and has been demonstrated on this side of the Atlantic too. The potential for political influence over legal decisions became a real issue, much reported in the press at the time, in the SFO’s investigation into BAE Systems. As a prosecutor, you are told to pursue your work “without fear or favour”, and let’s hope that any change in the structure of the SFO preserves this rule for the cases which currently fall within its jurisdiction.

In conclusion, the trend towards a US-style model for fraud case resolution has been developing for nearly a decade in the UK. There are good legal as well as cultural reasons why the UK system will always differ in significant ways from its US cousin, but one thing is clear: the US system of cooperation with Government agencies has been in place for decades and is well codified. All parties are clear as to the process, the rules of engagement and what to expect as an outcome. The UK system, on the other hand, is in its infancy, and seems to be constantly working under the prospect of tumultuous change. That change now seems inevitable, and that means more uncertainty, a potential loss of expertise and a potential disengagement from the process by the commercial sector. One just hopes that the UK does not fall foul of its promises in the field of anti-corruption, amongst others, in the wake of such change.